Comments on: The true nature of BITs (at least as I see it…) http://www.legalfrontiers.ca/2010/03/the-true-nature-of-bits-at-least-as-i-see-it%e2%80%a6/ McGill's Blog on International Law Mon, 06 Feb 2012 18:16:56 +0000 hourly 1 http://wordpress.org/?v=3.0.1 By: Kathryn Gordon http://www.legalfrontiers.ca/2010/03/the-true-nature-of-bits-at-least-as-i-see-it%e2%80%a6/comment-page-1/#comment-91 Kathryn Gordon Wed, 10 Mar 2010 15:13:29 +0000 http://www.legalfrontiers.ca/?p=791#comment-91 Thanks for the posting. It is true that the integration of investment protection obligations with other aspects of state responsibility, including obligations arising from general international law, is a major concern. I wanted to call your attention to an empirical study relating to the issues you raise. The OECD has surveyed international investment agreements' (IIAs') language (or absence thereof) in relation to labour, environment, anti-corruption and human rights obligations for 296 OECD and 131 South-South agreements. The survey shows that "only" 16 of the 39 countries in the OECD sample and 6 out of the 15 countries in the South-South sample include such language in any of their IIAs. Among the IIAs that contain texts on more general commitments, the style and placement of the language varies, rangaing from broad, short texts in preambles (the emerging continental European style) to long, detailed texts in preambles, articles and annexes (e.g. the North American style). The South-South agreements, the most frequently encountered issue establishes exceptions to MFN in relation to benefits stemming from regional cooperation in the labour, environmental or social fields. The survey also documents a distinct, but still hesitant, trend toward including such language and a slight tendency toward harmonisation of such language. The study is available at: www.oecd.org/dataoecd/3/5/40471550.pdf Thanks for the posting. It is true that the integration of investment protection obligations with other aspects of state responsibility, including obligations arising from general international law, is a major concern. I wanted to call your attention to an empirical study relating to the issues you raise. The OECD has surveyed international investment agreements’ (IIAs’) language (or absence thereof) in relation to labour, environment, anti-corruption and human rights obligations for 296 OECD and 131 South-South agreements. The survey shows that “only” 16 of the 39 countries in the OECD sample and 6 out of the 15 countries in the South-South sample include such language in any of their IIAs. Among the IIAs that contain texts on more general commitments, the style and placement of the language varies, rangaing from broad, short texts in preambles (the emerging continental European style) to long, detailed texts in preambles, articles and annexes (e.g. the North American style). The South-South agreements, the most frequently encountered issue establishes exceptions to MFN in relation to benefits stemming from regional cooperation in the labour, environmental or social fields. The survey also documents a distinct, but still hesitant, trend toward including such language and a slight tendency toward harmonisation of such language. The study is available at: http://www.oecd.org/dataoecd/3/5/40471550.pdf

]]> By: John G http://www.legalfrontiers.ca/2010/03/the-true-nature-of-bits-at-least-as-i-see-it%e2%80%a6/comment-page-1/#comment-84 John G Tue, 09 Mar 2010 07:26:26 +0000 http://www.legalfrontiers.ca/?p=791#comment-84 The author makes some good points, but we have to keep in mind why BITs are thought necessary: to keep 'host' governments from changing the legal or regulatory conditions under which foreign investors decided that they could make enough money to make an investment in those countries. The investors should take the law as they find it, but there is a great temptation on governments, once the investments are made and the benefits of the investments secured for the host country, to decide to regulate the conduct in new ways, possibly destroying the profit that was the incentive for the investment. BITs try to spell out the limits to such new measures and to establish fair procedures for resolving disputes about them. I agree that investors should not be protected against all evolution of the legal or regulatory regime in the host country - things change, new concerns arise, the impact of the investment may be different from what was anticipated, etc. But the public interest has to include the interest in bringing in the money and skills of the investor, as well as the interest in the people of the host country to reasonable behaviour. Arbitrary changes to the law after the money is in hand will discourage future investment. So it's a balance, and the initial point that it is not all about protecting investor expectations, no matter how extreme, is fair. But there is a reason why these treaties get made, and they are not paranoid. The author makes some good points, but we have to keep in mind why BITs are thought necessary: to keep ‘host’ governments from changing the legal or regulatory conditions under which foreign investors decided that they could make enough money to make an investment in those countries. The investors should take the law as they find it, but there is a great temptation on governments, once the investments are made and the benefits of the investments secured for the host country, to decide to regulate the conduct in new ways, possibly destroying the profit that was the incentive for the investment.

BITs try to spell out the limits to such new measures and to establish fair procedures for resolving disputes about them. I agree that investors should not be protected against all evolution of the legal or regulatory regime in the host country – things change, new concerns arise, the impact of the investment may be different from what was anticipated, etc. But the public interest has to include the interest in bringing in the money and skills of the investor, as well as the interest in the people of the host country to reasonable behaviour. Arbitrary changes to the law after the money is in hand will discourage future investment.

So it’s a balance, and the initial point that it is not all about protecting investor expectations, no matter how extreme, is fair. But there is a reason why these treaties get made, and they are not paranoid.

]]> By: Philip Duguay http://www.legalfrontiers.ca/2010/03/the-true-nature-of-bits-at-least-as-i-see-it%e2%80%a6/comment-page-1/#comment-75 Philip Duguay Fri, 05 Mar 2010 10:07:42 +0000 http://www.legalfrontiers.ca/?p=791#comment-75 Well put, Avidan. I had a similar epiphany yesterday at a wind energy commercial conference here in Cape Town yesterday. I think that business people and investors often forget that markets are created for socially useful purposes (in the case of wind energy, it is being actively promoted by the government so South Africa can break its dependence on coal power), not because they have the right to make money. No one has the right to make money if it hurts other people (hence, why the discussion of protection of investors comes along). But that prohibition of hurting people goes further than just to investors, it must go to the communities affected by those investments! This is where potential tensions will arise and where legal problems will come from. I think we can live in a market-driven economy in a global world ONLY if we re-define and redeploy the definition of a market. We learned recently from the United States that disaster arises when staunch capitalists are left at the helm! Well put, Avidan. I had a similar epiphany yesterday at a wind energy commercial conference here in Cape Town yesterday. I think that business people and investors often forget that markets are created for socially useful purposes (in the case of wind energy, it is being actively promoted by the government so South Africa can break its dependence on coal power), not because they have the right to make money. No one has the right to make money if it hurts other people (hence, why the discussion of protection of investors comes along). But that prohibition of hurting people goes further than just to investors, it must go to the communities affected by those investments! This is where potential tensions will arise and where legal problems will come from. I think we can live in a market-driven economy in a global world ONLY if we re-define and redeploy the definition of a market. We learned recently from the United States that disaster arises when staunch capitalists are left at the helm!

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